Tobacco Settlement Agreement Fund Oversight Committee




<MeetMDY1> January 8, 2009


The<MeetNo2> 1st meeting of the Tobacco Settlement Agreement Fund Oversight Committee was held on<Day> Thursday,<MeetMDY2> January 8, 2009, upon adjournment of the House and Senate chambers, in<Room> Room 129 of the Capitol Annex. Representative Rick Rand, Chair, called the meeting to order, and the secretary called the roll.


Present were:


Members:<Members> Representative Rick Rand, Co-Chair; Senator David E. Boswell and David Givens; Representatives Royce W. Adams, James R. Comer Jr., Charlie Hoffman, and Tom McKee.


Guests:  Roger Thomas, Joel Neaveill, and Angela Blank, Governor’s Office of Agricultural Policy; Michael Plumley and Dana Mayton, Office of the Attorney General.


LRC Staff:  Lowell Atchley and Kelly Blevins.


Co-chair Rand opened the meeting by noting that when a quorum was reached the committee would take action on the minutes of the December meeting. He then welcomed Mr. Roger Thomas, Executive Director, and Mr. Joel Neaveill, Chief of Staff, Governor’s Office of Agricultural Policy (GOAP) to the table, to report on the projects considered for funding during the December Agricultural Development Board (ADB) meeting. 


Mr. Neaveill reported to the committee that the ADB had approved four model programs totaled $110,000.  He stated that three projects at their December meeting totaling $150,050 in county funds from Boyle, Franklin, and Russell counties.


Mr. Thomas noted that the 2009 Kentucky Agricultural Development Board and Kentucky Agricultural Finance Corporation Annual Meeting will be held on January 15, in Lexington and invited members to attend. He also noted that many constituents of the committee members may be receiving awards at the luncheon and members will be made aware of who those recipients are. Mr. Thomas also noted that the June 30, 2008 Annual Report had been delivered to the members’ offices.


Mr. Thomas followed the report by explaining an insert in the members’ packets of proposed changes to the model/menu programs.  He noted that no changes will be made until the March meeting of the ADB in order to provide ample time for review and suggestions to be made from policy makers, extension agents, and county councils. They anticipate some policy changes from this document, he said.  He said the intent of every change is to allow for more farmers around the state to be able to participate in the county model programs. Mr. Thomas explained that the proposal suggests that model programs will basically be shifting to a menu approach.  Instead of offering ten or twelve model programs, all of those would be in a menu program and every item will be available to producers in that county.  Another suggestion is that a maximum lifetime limits for model programs would be repealed, the $15,000 maximum that producers can receive out of model program.  He noted that eight years into the program, producers are near that limit and are proposing an annual limit of $7,500 for county model programs for producers, enabling more farmers to participate and offering all model programs, or investment areas. He said that most feedback has been positive, and these changes will create a fairer system and enable more people to take advantage of the county programs.


            Senator Givens asked Mr. Neaveill to reiterate the methods used to inform participants about the proposed changes and how they will insure that they are made aware of the changes.


            Mr. Neaveill responded that the information was immediately provided to the extension agents by Dean Scott Smith of the University of Kentucky College of Agriculture.  Information was also mailed to the county council chairmen, the information was posted on GOAP’s Website, and project analysts sent direct emails to the extension services.  He noted that time has been set aside at the Annual Meeting on January 15 to discuss suggestions and concerns. Mr. Neaveill said they have made effort to give plenty of time for these proposed changes to be reviewed, to receive feedback, and not rush any part of the process.


            Mr. Thomas noted that he wanted to reiterate to the committee that these proposals were not rushed.  He said it has been evident for some time that changes needed to be made and after discussions at their planning meeting in November the ADB decided to create a five-member committee to review.  This committee of the ADB spent a day and half in Frankfort with GOAP staff to discuss and prepare these proposed changes. Mr. Thomas also noted that their intent is to improve accountability following the audit done in 2008. He said they believe these changes will improve that accountability.


            Senator Givens shared his experience with the county councils and the program from the early years.  He said a concern that continues to come up is feedback from the farmers; he asked if GOAP has received much input from constituents. He noted he feels that what is lacking is responsibility on the farmers’ part.


            Mr. Neaveill said they are in the process of collecting that feedback from e-mails and they will have a review council at some point in the near future.  He noted that in terms of farmer feedback it has been generally positive and from county council members also positive, he said that it is too early in the game at this point to say. 


            Mr. Thomas followed up by stating changes from one year to the next are usually implemented in January of the following year, but their hope that having given this process ample time to be reviewed, these changes can be implemented beginning in March.


            Senator Givens asked what the proper channel is for farmers to share their agreement or disagreement with the proposal.


            Mr. Thomas and Mr. Neaveill responded that the farmers should contact GOAP directly.


            Representative McKee said that making model programs eligible to all producers that eliminates a first come, first serve arrangement that in some counties had caused problems.  He asked about how model programs can be run on a yearly basis.


            Mr. Thomas replied that there is also a proposal for a statewide scoring system and that there have been programs with a life of eighteen months; they are proposing that all programs changed to be contained in a twelve month period.


            Representative McKee asked what is being done to prevent a farmer, then a spouse from applying separately and the same family or entity receives multiple funding.


            Mr. Thomas noted that there have been a few instances of that happening and said they are proposing that it be tracked by a Social Security number and farm serial number. Once either is used, that is all that can be utilized for that one year.


            Senator Givens mentioned the evaluation of programs and said the process should always be evolving.  He noted that he applauds the changes contemplated and asked about the percentage of funding for county administration. Mr. Thomas said that the 5% allowed for administration does not change.


            All documents are on file with the LRC Library


            Co-chair Rand noted a quorum was present and asked for a motion on the minutes from the December meeting.  Representative McKee made the motion for approval, second by Representative Adams.  The minutes were approved by voice vote.


            Next, Co-chair Rand welcomed Mr. Michael Plumley, Assistant Attorney General, to the committee.  Mr. Plumley reported to the committee that the Office of the Attorney General (OAG) is currently pursuing $50 million in past non-participating manufacturer (NPM) adjustments to Kentucky payments and payments from companies that have filed for bankruptcy protection.  He noted that the OAG had also defended the Master Settlement Agreement (MSA) and the escrow statutes against numerous antitrust and constitutional challenges, thus far successfully.  Mr. Plumley noted that since the MSA was signed in 1998, Kentucky has received over $1 billion in total payments ($114 million in 2008).  He said that it is very difficult to predict actual payment amounts for 2009 due to sales, withholding and other possible defaults, but Kentucky should receive about $115 million in April 2009 with a potential for $120 million.


            Representative McKee asked about violations, when companies are removed from the list of certified manufacturers, but are able to remain in the trade channel.


            Mr. Plumley responded that there is no limit in current law although there is a cut-off on cigarette stamping done by the wholesalers.  He noted they have had situations where companies have had a large inventory and have stamped a large amount before the deadline. They are required to give a 30-day notice and the companies are able to continue producing and stamping is done during that time. 


            A copy of Mr. Plumley’s remarks are on file with the LRC Library.


            There being no further business the meeting was adjourned at approximately 4:30 pm.